Is Robert Reich Trying To Smoke Out Obama by Calling on Him To Break Up Big Banks and Pass Glass-Steagall?

October 24, 2012 • 11:16PM

On Oct. 18, Robert Reich called on Obama to break up the nation's biggest banks and to resurrect Glass- Steagall. The op ed argues that if the President took such action it would be good policy and would smoke out Mitt Romney.

Earlier this year, in July, immediately after Sandy Weill had recanted his opposition to Glass-Steagall, Reich had written an op ed in the Huffington Post entitled: "The Man Who Invented 'Too Big to Fail' Banks Finally Recants. Will Obama or Romney Follow?" in which he concluded in a manner not based on the party system: "What's the betting that one of the presidential candidates will take up Weill's proposal?"

Three months later Reich ostensibly launches into an attack on Romney as Wall Street's candidate, knowing full well that it has been Obama who has opposed Glass-Steagall, implemented the bailout of Wall Street, and pushed the Dodd-Frank Act, which maintains the too big to fail policy. He does so even though in the first debate, Romney called for repealing Dodd-Frank and eliminating the policy of too big to fail.

Reich writes: "The President should counter Romney's extraordinary solicitude toward the Street with a proposal to cap the size of the nation's biggest banks so that no bank is ever again too big to fail. And to resurrect the Glass-Steagall Act, which once separated commercial from investment banking. In the 1980s the ten biggest banks had less than 30 percent of bank depositary assets. Now they have 54 percent. And the four biggest now dominate the Street almost completely. Because lenders and investors know they're too big to fail, the four biggest banks have a competitive advantage over smaller rivals that pose larger financial risks. That means they'll only get bigger. Breaking up the biggest banks and capping the size of all banks is hardly a radical suggestion these days. The Dallas Federal Reserve Board, which has never been accused of excessive liberalism, has called for it. So has Sanford Weill, the creator of Citigroup, one of the biggest of the big. So has Daniel Tarullo, the Federal Reserve governor charged with bank regulation. So have conservative commentators such as George Will.... Calling for a breakup of the biggest banks and a resurrection of Glass-Steagall would smoke out Mitt Romney — revealing clearly and decisively he's not on the side of most Americans."

Reich is correct that Romney, like Obama, has not endorsed Glass-Steagall. It is also true that on economic policy he is presently in large part captive to Republican Party ideology.

However, the fact that Sandy Weill and a number of conservatives have endorsed Glass-Steagall points to the potential of freeing Romney from the Republican Party ideologues who oppose it.

Is it possible that Reich, in making this proposal, is actually trying to smoke out not just Romney but also Obama, who for the last four years, with help from Geithner and Holder, among others, has in fact defended and bailed out Wall Street at the behest of the Queen of England to the detriment of the American people?